How do you vet out good wholesale companies?
Investor · GIlbert, AZ · Member since 2018 · 24 posts · 3 votes
Not looking for specific companies. But just curious, how do you find good wholesalers?
Google searches have lead me to several companies I have spoken with, but curious to know how BP members determine if they are a good reputable company?
I know they get a bad rep, but I am wanting to work with some out of state and would love to hear how to weed out the bad ones. Thanks!
It's a catch 22 really, a good wholesaler is not going to be easy to find, because they are not looking for buyers. A good wholesaler has an extensive buyers list that probably buys everything they send out, so there is no need to keep collecting emails.
As a wholesaler, I know that when I get a property under contract, I know exactly who to pitch it too, for the sale. I also, know that it will be closed on, if that investor likes it. It's really tough for me to accept a new buyer in, unless it's a unique property type or my goto investor(s) has enough projects going. I know that you have to be given the chance, but it is something that a wholesaler has to consider.
With that being said, here are some quick guidelines to go by when you are dealing with a wholesaler.
1. Price - The price is the first test. If their price is well below market rate, that is an excellent starting point. It likely means you are dealing with a real wholesaler, not someone trying to pass off MLS "quality" deals.
2. Repairs - As stated, a wholesaler should provide you with detailed information about the repairs, not just a number. It takes no effort to put a number on an estimate sheet. The major repairs, should come with written estimates from at least 2 companies.
3. Pictures - There should be an extensive gallery of photos, in HD, and not taken on a cell phone. The pictures should show every flaw the home has, regardless if it's a small problem or not. For example: My properties come with no less than 35 pictures. No joke, I show even a thumbtack in the wall.
4. Title - The title should be open and cleared for closing. There is nothing more annoying that an investor doing all of their due diligence, just to find out the title is clouded and possibly can't or won't close.
5. Contract - There should be no one in between the seller of the property and the wholesaler. This avoids the daisy chain and you paying 5 assignment fees. The daisy chain approach almost always ends up in a tremendous amount of your time being wasted, and the deal falling apart.
6. ARV - You should receive a full CMA report, about that property.
7. Targeted - They should only send you deals that meet your objectives, and not just add your email to the other 5,000 they have.
8. Professionalism - Obviously, all monies get handed off to the title company or attorney that is closing the deal.
9. Communication - They should have very intimate information about the home. This is really good way to find out if they are just in the chain, or that they have actually visited the property.
10. Pressure - You should never feel like you have to do the deal now. This approach should raise flags. Maybe the contract is close to expiring? Maybe they don't have control of the contract? I will add that there is an expectation that you can analyze your deals, within a reasonable amount of time, but you should never fill like you have to sign a contract tomorrow.
I would suggest you visit your local meetings, especially of the membership variety. These types of organizations tend to bring in those that understand, that you have to spend it to make it. A large wholesaling company would definitely spend the money to attend and possibly pitch some deals.
My last piece of advice. Avoid the email collectors. This will almost likely end in 2 ways. You get sent deals that are 30% over the real ARV, or you just became the newest member of their spam emails. It's important to remember that 75% of a wholesalers time and money, is spent on marketing for properties, not buyers. The rest of that time is spent following leads, visiting properties, and getting all the paperwork completed for the deals, already in the pipeline. If all you are seeing from them is "great deals can be found here, sign up now", they don't have deals. If they did, they would not have time to blast social media with these ads.
@Drex Tanner I'm going to try and not come off super negative on this, but the reality is that most are bad. What classifies one as good in your eyes versus one that is bad?
It used to be where the good wholesalers would do a lot of the legwork for you. They would take pictures, put numbers together, some would even do a scope of work and not go above the 70% rule. Today its guys or gals just throwing up a non descript ad on Craigslist with no pictures, very little information and no real way of contact them except through the CL email system. Half the time you don't hear back from these folks for days only for them to tell you they "sold" the property before you emailed but they can add you to their list for the next one.
I just sat down with a wholesaler last week that does a good volume of deals. They are moving properties now with purchase and repair around the 75% number. They require a $5,000 non refundable deposit and no inspections so for someone out of state like you that's going to be fairly challenging model to work with.
From my experience it's just trial and error and getting on lists. Some care to learn your criteria and others don't because they just want to build a list and shoot off emails. I've received email alerts for probably over 1,000 wholesale properties since I started investing and I've purchased fewer than 5 of them. It's very rare that model works for us. Good luck.
@Drex Tanner I'm going to try and not come off super negative on this, but the reality is that most are bad. What classifies one as good in your eyes versus one that is bad?
It used to be where the good wholesalers would do a lot of the legwork for you. They would take pictures, put numbers together, some would even do a scope of work and not go above the 70% rule. Today its guys or gals just throwing up a non descript ad on Craigslist with no pictures, very little information and no real way of contact them except through the CL email system. Half the time you don't hear back from these folks for days only for them to tell you they "sold" the property before you emailed but they can add you to their list for the next one.
I just sat down with a wholesaler last week that does a good volume of deals. They are moving properties now with purchase and repair around the 75% number. They require a $5,000 non refundable deposit and no inspections so for someone out of state like you that's going to be fairly challenging model to work with.
From my experience it's just trial and error and getting on lists. Some care to learn your criteria and others don't because they just want to build a list and shoot off emails. I've received email alerts for probably over 1,000 wholesale properties since I started investing and I've purchased fewer than 5 of them. It's very rare that model works for us. Good luck.
Thank you, this is helpful. Crazy only 5 of 1000!
@Bob Woelfel I agree that you have really good point for work with wholesalers, it turns out really not worth time for out of state investor to work with them. Then what is really good choice for out of state flips to source good off market deals?
I agree with Bob's observations. However, I am a local wholesaler, flipper, and occasionally will hold a rental if it makes sense. I still do legwork for out of state investors, including accurate scope of work reports, very detailed photography, and as a licensed broker, I believe I am very good at determining accurate and relevant SALES comp analyses to assist with your due diligence. Rather than waste time with random properties, I've learned it is beneficial for both parties to take the time to really learn what an investor wants to buy, then go find it for them. As long as you respect my time and follow through when the purchase is right, I am happy to take on more work for serious out of state investors. Please reach out!
It's a catch 22 really, a good wholesaler is not going to be easy to find, because they are not looking for buyers. A good wholesaler has an extensive buyers list that probably buys everything they send out, so there is no need to keep collecting emails.
As a wholesaler, I know that when I get a property under contract, I know exactly who to pitch it too, for the sale. I also, know that it will be closed on, if that investor likes it. It's really tough for me to accept a new buyer in, unless it's a unique property type or my goto investor(s) has enough projects going. I know that you have to be given the chance, but it is something that a wholesaler has to consider.
With that being said, here are some quick guidelines to go by when you are dealing with a wholesaler.
1. Price - The price is the first test. If their price is well below market rate, that is an excellent starting point. It likely means you are dealing with a real wholesaler, not someone trying to pass off MLS "quality" deals.
2. Repairs - As stated, a wholesaler should provide you with detailed information about the repairs, not just a number. It takes no effort to put a number on an estimate sheet. The major repairs, should come with written estimates from at least 2 companies.
3. Pictures - There should be an extensive gallery of photos, in HD, and not taken on a cell phone. The pictures should show every flaw the home has, regardless if it's a small problem or not. For example: My properties come with no less than 35 pictures. No joke, I show even a thumbtack in the wall.
4. Title - The title should be open and cleared for closing. There is nothing more annoying that an investor doing all of their due diligence, just to find out the title is clouded and possibly can't or won't close.
5. Contract - There should be no one in between the seller of the property and the wholesaler. This avoids the daisy chain and you paying 5 assignment fees. The daisy chain approach almost always ends up in a tremendous amount of your time being wasted, and the deal falling apart.
6. ARV - You should receive a full CMA report, about that property.
7. Targeted - They should only send you deals that meet your objectives, and not just add your email to the other 5,000 they have.
8. Professionalism - Obviously, all monies get handed off to the title company or attorney that is closing the deal.
9. Communication - They should have very intimate information about the home. This is really good way to find out if they are just in the chain, or that they have actually visited the property.
10. Pressure - You should never feel like you have to do the deal now. This approach should raise flags. Maybe the contract is close to expiring? Maybe they don't have control of the contract? I will add that there is an expectation that you can analyze your deals, within a reasonable amount of time, but you should never fill like you have to sign a contract tomorrow.
I would suggest you visit your local meetings, especially of the membership variety. These types of organizations tend to bring in those that understand, that you have to spend it to make it. A large wholesaling company would definitely spend the money to attend and possibly pitch some deals.
My last piece of advice. Avoid the email collectors. This will almost likely end in 2 ways. You get sent deals that are 30% over the real ARV, or you just became the newest member of their spam emails. It's important to remember that 75% of a wholesalers time and money, is spent on marketing for properties, not buyers. The rest of that time is spent following leads, visiting properties, and getting all the paperwork completed for the deals, already in the pipeline. If all you are seeing from them is "great deals can be found here, sign up now", they don't have deals. If they did, they would not have time to blast social media with these ads.
IMO you don't want to spend too much time trying to vet the wholesaler. Each and every property and deal needs to be vetted.
Most wholesalers are going to get a property under contract, then add a ridiculously high fee, and then email blast it out to anyone and everyone.
As buyers this doesn't do us any good. This can end up putting us in a situation where there may be a lot of competition for the property and it forces us to move so quickly that we have to make decisions before we can property evaluate the situation. It's just a bad method.
The ideal situation is to be connected to someone who sources their own properties. They take the time to understand what you are looking for and what you need. They actively look for properties that fit your criteria, meaning they are trying to find YOU a property. Obviously, they need a cut on the deal too, which works very well, as long as it is reasonable.
Someone actively looking for YOU, who will make YOU the first call when they find a property that fits.
@Drex Tanner So I'm on a few different lists for wholesalers and I will say most of the emails I get are junk. One blurry picture of a house, sometimes with a zip code, and an "ARV." Most of these have not taken the time to talk to me at all - they just blast out these very vague "deals." That said, I have one that is absolutely excellent. His deals are in areas I like, include many pictures, comps in the area, a list of repairs, and the communication has been spot on. I will buy deals from this wholesaler all day long (as long as they stay good). But I stay away from any wholesaler that doesn't provide the details. However, even with a great wholesaler, make sure to do your won due diligence. Never solely rely on what someone tells you - run your own numbers and get your own comps.